Insights on beer marketing & PR by a beer-war vet

Lager. Now there’s style name that seems to have almost disappeared from the local beer market.

Why? Is the industry just a little bit embarrassed about ‘lager’?

“Yes” there are many lager beers available: lots! Far and away the majority of beer consumed in Australia IS lager.

The L word
But funny, even many mainstream lagers are called everything but lager. We have ‘Bitter Ales’, ‘New’, lots of ‘Draughts’ – but not many unabashedly, in-ya-face“call me lager!” brands. [Okay okay .. I know about Foster’s and Crown…]

I hear a few historical justifications. Smoothing transitions in the market from ales to lagers in the early 1900s; XXXX Sparkling Ale to XXXX Bitter Ale in 1924 for example. I hear of aversions to hearing such a Germanic word given two world wars.

But it seems as though this avoidance – this ‘lager cringe’ – is still in play.

A history of industrial suds
This cringe has hung around to influence the growing craft beer segment in Australia. There’s clearly been a blind spot when it comes to lagers.

It’s understandable. Craft beer has been, for many, a rejection of the samey mainstream lagers that came to dominate each state market. XXXX, Carlton Draught, West End, Swan .. you know the line up.

‘Craft beer’ is almost code for ‘I’m over mainstream lagers.’

This response was similar in the US market. Here the craft beer sector had a decade or two head-start on Australia. Here too the market had become dominated by lagers from big corporate brewers like Anheuser-Busch.

US lagers on the comeback trail – yeee haaar!
Given the historical lead by the US market, it’s interesting – perhaps portentous for Australia – that lagers are increasingly appearing under the US craft beer banner.

Mike’s article provides great background on lager as a style while highlighting a number of new craft lagers.

Mike cites Jack Hendler of Massachusetts’ lager-only brewery, Jack’s Abby, as finding: ‘lager yeast’s neutral flavor helps the essence of his other ingredients really pop. This means simpler, cleaner expressions of all the flavor that can be coaxed from hops and malt. He’s used that to his advantage to create some brilliant style-bending lagers that even the most die-hard ale lovers can appreciate.

Speaking of America, in a recent article in Australian Brews News about Brooklyn Lager, there was also a “renaissance predicted” for lager. In Australia, Eric Ottaway [from Brooklyn Brewery] noted: “.. rumblings that the broader lager category could be on the comeback trail.”

“Craft beer has grown for many positive reasons: most to do with great flavoured ales.

“True, some of this is a rejection of the yellow, bland, fizzy lagers that dominated the market. In most bars that’s the only style you could get for decades.

“Yes, I do see lagers as making a comeback in Australia. And craft brewers are well placed to do that.

“We, craft brewers, have learned a lot about bringing back taste to Aussie beer with great ales. Craft has been the Realm of Ales. I don’t see that changing much.

“All craft brewers welcome a diversity of styles. We look forward to lagers regaining the respect in Australia they’ve retained in Europe. We look forward to new tasty Aussie craft lagers adding buzz and excitement to the beer market. That’s a good thing.”

Dermot O’Donnell: Master Brewer

Lager’s lighter legacyI asked renowned Australian brewer, Dermot O’Donnell, what he thought about the potential for a refreshed interest in lagers in the Australian craft beer segment.

He noted that it was easier said than done: ales, or rather ale yeast, was more flexible and forgiving than lager yeasts.

“Let’s not forget the Australian market took to lager in a big way when the style was introduced. Up to then we had traditional ales.

“Lagers provided a lighter, easier drinking style that proved very popular as the Foster brothers found out. So, if you like, there was a market shift away from ales over a few decades.

“But it was only refrigeration that allowed this shift. Lager needs cold brewing temperatures.

“And that’s a challenge that sorted out the market. Lagers were popular but they required new refrigeration plants plus they were harder to brew and get right, and harder to keep right consistently over time. Lager yeasts are finicky buggers and require much tighter control over a longer brewing time than ales.

“This is one reason why bigger breweries won out. They had the scale to produce lagers – what the market wanted – with greater consistency of quality over time. The smaller guys could not do this: could not maintain quality, could not keep up.

“Today however, brewing technology is so much more sophisticated and scalable. With relatively little capital investment, brewing lagers is much easier, even in a small craft brewery.”

But does Dermot see lagers as having a comeback via Australia’s craft breweries?
“Yes: for good lagers. Great lagers deliver subtle flavours, typically from traditional, old world – German and Czech – noble hops. It’s great to have that traditional style perfectly interpreted.

“But lager doesn’t have to be strictly ‘noble’. Craft brewing is all about re-interpreting style and flavour – experimenting.

“New world hops from American, Canada and New Zealand provide opportunities for new interpretations of lager. That’s exciting. A number of Aussie craft breweries produce lagers: like Moon Dog and Stone & Wood for example – there are others. There will be more craft lagers I think.

“But, I don’t think craft breweries will shift away from ales in any great way however.

“There are hundreds of ale yeasts commercially available compared to lagers. Ales are less of a hassle to brew let’s face it. And ale provides a broader flavour palette to play with. They’re fun. They allow lots of robust interpretations with new world hops. With warmer fermentation we can create big flavours. With cooler temperatures we develop ales which most would think were lagers. There’s always been that overlap in style between ales and lagers.”

Big breweries will love this .. maybe not
We’d expect that big brewers LION/Kirin and CUB/SAB-Miller will benefit from any swing to lagers. However, I suspect that this shift may highlight the delights of lager newly interpreted by craft brewers rather than prompting a return to traditional mainstream brews.

I’m not foreseeing any lift in sales for VB, XXXX Bitter Ale or Tooheys New is what I’m saying. Hmm .. they aren’t called lager anyway.

Flavour redux
Lagers took off in Australia in the early to mid 1900s because, in part, they were a refreshing, undemanding, quaffable brew. It might be hackneyed, but they suited Australia’s conditions where, thanks to new refrigeration, we could enjoy a cold beer.

They may not have abided by German purity laws, but they were certainly sessionable. And perhaps, over time, the big brewers sacrificed flavour in favour of sessionability. It sold more.

I hope that if there is substance to this reported new lager frontier in craft – this renaissance of lagers – that the flavour Jack Handler waxed so lyrical about becomes a delicious reality in a range of new local craft lagers. I look forward to that.

I had joined Castlemaine Perkins Limited in October 1986 as Public Affairs Manager. Early the next year, MD of the brewery, Frank Burnett, summoned me to his office in our Finchley Street HQ overlooking the XXXX brewery.

Without words, but with obvious disgust, Frank threw the now infamous Bond Brewing repositioning plan across his desk. I opened my mouth to object. Frank just shook his head and, as I recall, said: “Every objection you can think of has been raised. Just do it. Get the signage underway and, oh yes, you’re now editing the central magazine. Close down every brewery’s in-house newsletters.”

While the other breweries went through the same repositioning it’s fair to say it was Castlemaine and XXXX that were most adversely impacted by consumer backlash and competitor response.

In early 1990 Bond Brewing went into receivership and Lion Nathan took over the breweries later that year.

Those who ignore history..
Bondy, or rather Bond Corporation, took over the Swan Brewery in his home state of Western Australia in 1981. Thereafter he took over east coast brewing conglomerate Castelmaine-Tooheys in 1983. His company now oversaw about half of the national beer market.

While the media loved the glitz of Bondy’s brewing business with his Swan airships, Schooner XXXX, sponsorships and beer jingles by Mo and Jo, the stock market was less impressed. Again: polarising.

Make ‘Bond’ ubiquitous!
To remedy this, the Corporation’s board believed they would attract major institutional investors by renaming all his breweries as Bond Brewing.

This step remains a case study in ‘how to lose generations of consumer loyalty overnight’ as well as one of corporate hubris. Indeed, it’s a lesson a number of big corporate brewers seem to have ignored .. still. And they wonder why ‘small and local’ is doing so well ..

Polarising is an under statement.

Because, under the direction of Bond Brewing’s Executive Director, Bill Widerberg, Castlemaine Perkins, Tooheys and Swan were very publicly rebadged as Bond Brewing Queensland, New South Wales and Western Australia respectively. As if this wasn’t enough for parochial beer drinkers of the time, Bond Corporation also changed the addresses on all labels to the corporate address in Perth. Read more…

Equity for punks? Drink like you own the place
With CUB and LION now gobbled up by foreign beverage and food companies SAB-Miller and Kirin respectively, how many Australian breweries are now on the Australian Stock Exchange? Any?

Given the success of Scots brewery Brew Dog’s ‘Equity for Punks!‘, perhaps there are lots of good reasons to co-operate when it comes to beer.

Fresh local beer in which you have a co-operative interest or, as Fair State Brewery’s website says, Drink like you own the place. And to that ….

I was attracted to the bright blue pallet load of Foster’s Lager at Dan Murphy’s.

But what caught my attention was the alcohol content of Foster’s Lager now at 4%.

[UPDATE/CORRECTION 7 December: IT’S CLASSIC!! A case of reading the fine print! This brew is called Foster’s Classic and apparently is being sold exclusively through Dan Murphy’s; the comments at this web site about how ‘Classic’ it is are worth a read. Thanks to beer writer Matt Kirkegaard for the heads-up.]

Brand histories ignored
Why is CUB, or rather parent company SAB-Miller, doing this?

Okay.. Foster’s glory days are long over. Nonetheless it’s fair to say it remains an iconic beer brand recognised globally as Australian.

So has CUB learned nothing from the consumer backlash when they did this to VB? Remember CUB’s letter of apology in the press when they ‘fixed’ it?

Have they not checked their history and wondered at the demise of other strong CUB brands like Abbots Lager, Reschs Pilsener and Brisbane Bitter when alcohol was sneakily reduced?

CUB has recently cut the alcohol content of Cascade Premium too.

Perhaps Foster’s Lager is set to be yet another discount brand fighting on price. Call me nostalgic but that would be a sad end to this famous brand.

Cost cutting your way to growth
There is only one reason this is happening of course. It’s to reduce the Federal Excise the brewery has to pay which is based on alcohol content. Okay .. it’s the job of business to reduce costs. Consumers understand that.

What they don’t understand is a decision to ignore them and to reduce the essential ingredient and, invariably, the taste of a brand they prefer – or used to prefer.

SAB-Miller’s global webpage says it has “A commitment to growth.” Perhaps they’ve not heard the marketing truism which states “you can’t cost-cut your way to growth.”

However I suspect those making such decisions at CUB are not listening: certainly not to consumers. Pity.

Over the years I’ve had many conversations with Brett about Australia’s brewing heritage. Often these chats were about the massive decline in small breweries across Australia in the late 1800s and early 1900s. This rapid decline was in response to advances in brewing and transport technologies, stiff competition from large city-based breweries, and new Federal supervision but also rationalisation due to economic downturn (thanks Brett!).

My interest was in the role this phase had in setting up the state-based dominance of mega-breweries like Castlemaine Perkins Limited, Tooheys, Cascade, CUB and Swan.

One of an increasing number of successful Australian craft brewers, Dave Bonighton, at the Mountain Goat brewery. He’s a member of the Craft Beer Industry Association. Source: ABC Rural website. Pic: Cath McAloon

“The trend is your friend” so they say
A recent article by Brett highlights an important brewing milestone. It tells some good news about the current number of breweries across Australia. With Brett’s permission I’m pleased to share this good news story in full. Enjoy .. Read more…

After the hefty consumer backlash to Crown Lager’s new taste (aka reformulation) as well as the failure of Crown Pilsner and Crown Gold, you’d think CUB would be treating Crown with more respect. Being gentle – softly softly – with such a key brand.

Crown Golden Ale in its black and gold livery

But no..

So .. this latest brand refurbishment for Crown prompts me to ask:

Is Crown Golden Ale filling an identified demand/niche or just line extending as CUB tends to do reactively when a brand is under serious pressure e.g. VB Original Ale?

Or could it be that CUB has spotted the trend in the UK where ‘golden ales’ are chalking up surprising growth in recent years?

The Guardian quotes Tesco ale buyer Chiara Nesbitt who notes: “Over the last five years ale has made a resounding revival as a flavoursome beer that is now appealing to a younger generation of beer drinkers. Golden ale with its light and refreshing taste is playing a major role in this revival as it is the beer lager drinkers first generally try if they want to switch to ale.” (my emphasis)

In support of this view, CAMRA (Campaign for Real Ale in the United Kingdom) defines golden ales as a “.. new style of pale, well-hopped and quenching beer developed in the 1980s as independent brewers attempted to win younger drinkers from heavily-promoted lager brands.” (my emphasis)

Sneaking its way into craft?
Many beer experts will claim golden ale as being a style which has its origins in, and is now ‘owned’ by, the craft beer segment. I tend to agree.

So is this just CUB nudging the style boundaries and giving a hat-tip to a popular craft beer?

For decades major brewers have competed and paid heftily to secure choice, high-profile positions in major retailers’ bottle shops and liquor barns.

The visual customer-facing beer war at POS
Every customer-facing cubic centimetre was precious turf. It was (and remains) a very competitive visual war for beer brand presence in major retailers.

And the big brewers were all over it! They owned it – they thought. Indeed, they devised their own science to prove it: ‘space planning’ and ‘planograms’ and whatever.

The most highly sought after POS placements in retailers’ fridges are, of course, at eye level. The grab-and-go slot.

So for years, what have we seen at eye-level? Usually six packs of VB or Tooheys Extra Dry or XXXX Gold; the result of big brewers with big brands paying the big retailers big bucks.

Craft now dominates at eye level
But a trip to Woolworths’ owned BWS shows how times have changed. Craft beers are front and centre.

This pic from BWS South Melbourne was central to the fridge fronts. There was no VB or Carlton Draught in this frontage at all. Those brands were back in the cold room.

Clearly BWS is on top of consumer interest at retail. And the consumer increasingly wants something new to try: an interesting brand or style to drink and brag about.

Okay, quite a few of the craft brands in this BWS are Woolies’ own private labels (often called faux craft) and clearly the retailers are making better margins, but the takeout is clear: craft has won this particular POS battle.

Big brewer versus big retailer – control of the POS
For years the big brewers believed this key point of sale in retail was theirs.

That sense of entitlement, I suspect, has rankled the big retailers for some time.

These facings must seriously be pissing big brewers off no end. Especially, as you can bet many of these small craft brewers are paying nowhere near as much for the privilege.

On the matter of beer provenance I must highlight and hat tip the role Matt Kirkegaard, arguably Australia’s leading beer commentator and blogger, has played in bringing this issue to prominence.

After penning my previous post I came across an earlier post and podcast by Matt about beer provenance concerns. I urge you to read and listen to this interview with Dr Chuck Hahn by clicking on the RBN pic immediately below. Maybe miss the preamble and start 10 minutes in.

While contacting Matt, beerlines took the opportunity to quickly interview him on beer provenance and secure an update on his thoughts.

Beerlines:“As Editor of Australian Brews News is provenance becoming more important? If so is there any variation between small and big brewers?”

Kirkegaard: “It’s an interesting question.

“As our shelves become more cluttered with a wider array of beers, consumers are looking to brand values as much as flavour to aid their selection.

“It’s here that provenance can really matter. It’s also here that large and small brewers can be pushing things a little too far and muddying the provenance waters.

“While it’s very easy to point the finger at beers such as CUB’s outright deception with Byron Bay Lager, or LION’s highly dubious labelling of Kosciuszko Pale Ale, they can quite rightly point their fingers at smaller brewers who have taken the ‘we don’t hide it, but we just don’t advertise the fact’ line when it comes to own their own contract brewing.

“It really doesn’t matter to the quality of the beer, but the unwillingness to be open gives everyone the right to hedge a little and that hurts craft.

Unwillingness to be completely upfront .. lowers the craft bar
“While in one sense I can understand their thinking, it’s the craft brewers’ own unwillingness to be completely upfront that allows the debauching of the craft beer market by the likes of Coles’ Steamrail brand for example: indeed one beerlines used in earlier posts.

“When Coles can point to their product and say, quite honestly, that it comes from the same brewery as Mountain Goat’s Steam Ale and Summer Ale, and Mountain Goat offers nothing to differentiate their beer .. well, it lowers the craft bar. Read more…

The rate of change to pubs in South Melbourne seems to have cranked up recently.

There’s lots of new ‘For Auction’ and ‘Sold’ signs on pubs: at the Town Hall and Water Rat pubs for example. Indeed, the former is closed.

I’m not sure if what I’m noticing is an acceleration of long term change or something new. I suspect the former. South Melbourne is littered with many converted pubs of yesteryear: mostly on street corners.

Clearly the pressure is on to have a point-of-difference to traditional watering holes.

Laté gentrification
Gentrification – and its ’boutique’ pub offer – seems to be following the path set by cool coffee shops in the area like St Ali and Deadman Espresso.

The Cricket Club pub on Clarendon Street for example is being massively overhauled and currently features signage for a boutique pub to open there mid 2014.

Honey Bar on Clarendon Street and Lamaro’s on Cecil Street and The Wayside Inn already offer trendy, gentrified venues. New (hole in the wall) bars like Bellota in Bank Street and Claypots at the Market are appearing.

Meanwhile other pubs have gently gentrified, like The George which has rebadged itself as the ‘G’, and the Golden Gate which modernised and now touts itself as a gastro pub.

The Cricket Club hotel on Clarendon going ’boutique’

Some traditional pubs like the Emerald and the Rising Sun look like they are doing ok. The line up of empties outside the Emerald was pretty healthy by today’s standards.

Clearly they have taken steps to improve their offer and cater for the changing demography of their catchments.

A healthy line-up of kegs outside the Emerald on Clarendon

Others like Bells pub (which saw better days when Billy was there), the Maori Chief and Southern Cross Hotel just seem to be hanging on.

Get niche or get out
The old marketing saying went “Get big. Get niche. Or get out.”

Well big ain’t an option. And, if South Melbourne is indicative, then the pressure for pubs to find a viable niche and cater for it is mounting.

Unfortunately long-standing ‘locals’ continue to close as they fail to find such support.

Hopefully the interest provided by craft beers, as seen in the St Kilda Taphouse for example, will help pub owners and pub workers to keep the customers coming.